The latest news on property data and Home Prices should not come as a surprise and we should not begin celebrating an end to the crisis. In our article Cyclical, Seasonal and Emotional, we discussed the three critical phases of real estate selling patterns that have attributed to the housing bust.

The latest news and public records indicate that these critical phases are performing to historical levels. That is, the summer seasonal market is showing a correction to the cyclical change that began in 2007. Now the million dollar question is, will the fall seasonal market (which affects Florida, Arizona and Nevada) continue to show recovery or will the markets pause until the next “Selling Season in 2010?”

Our report: Housing in Crisis(published in March 2009) addressed the broader issue of excess housing. Again, there is good news on this front. The excess housing is being absorbed at an annualized rate of about 1 million units. Having a glut of 5 million units at the end of 2008, this means we have another three to four years before the overall markets start to recover.

Housing Recovery is the focal point here. We predict that the Northeast will continue to show stability, with modest corrections in local markets from 3% to 5% through the end of 2010. The Midwest remains strong and will experience similar stability. In the five biggest areas where excess housing still dictates selling patterns, we are predicting that Arizona will recover sooner than sections of Florida and Vegas.

The latest news on the housing market is not a surpirse. Recovery and Stability are the focal points and we should start to see signs of this in the upcoming months.

No one should be surprised when the next Housing Index comes out in September which will show a further strengthening of the market and continued adjustment in housing values in an upward trend. Our report Median Sales Price published in March of 2009 indicated that the overall Median Sales Price would move upward to $215,000 to $220,000 by year end. The current median sale price as reported by the Commerce Department is a $210,000, an increase of over 5% from the low of $201,400 early this year.

In a rare occurrence over last six months, we’ve finally received some good news coming from Washington about the economy. Yesterday, the House Finance Services Committee heard testimony on a bill for possible Troubled Asset Relief Funds (TARP) reinvestments.

HR 3068, or the TARP for Main Street Act of 2009, proposes to reinvest $6.5 billion to the home ownership and housing efforts. Public records show that as of June 30, the US Treasury Department issued $399 billion of the $700 billion TARP funds, which received back $70.1 billion from stock repurchases and $6.7 billion in dividend payments on preferred stock through the Capital Purchase Program.

The proposed $6.5 billion would be distributed as such;

$1 billion to build affordable housing

$1.5 billion for the US Department of Housing and Urban Development to distribute to state and local government for the redevelopment of abandoned and foreclosed homes

$2 billion in emergency mortgage relief

$2 billion to HUD to stabilize multi-family properties that are in default or foreclosure or have recently been foreclosed.

As the initial $399 billion of the TARP funds have been distributed effectively, why is there an additional $1 billion being used to build NEW housing? With an additional $1.5 billion for ‘redevelopment?’ One of the critical factors of the housing bust was, and still is, the housing oversupply. At last year’s end, there was an excess of 5 million homes that needed to be absorbed. Why add on to this already incredibly high number?

Critics of the bill had this to say.

Rep. Spencer Bachus, R-Ala., in a statement on the bill, criticizes the $1.5bn that would go toward the Neighborhood Stabilization Program, which he says could be accessed by the community group ACORN. Bachus, ranking member on the House Financial Services Committee, said the group is “notorious” for its efforts to commit voter fraud and more funds available to the group would undermine the administration’s efforts for transparency and flexibility o the Treasury Department to strengthen the financial system.

“One of the best things we can do to stabilize the credit markets and promote long-term economic growth is to restore fiscal discipline and stop the reckless government spending,” he said. “As institutions begin to pay back their TARP assistance, we need to end the bailouts and return that money to the taxpayers thereby reducing the deficit.”

These arguments surely hold merit. But if they really want to promote economic growth and return money to the taxpayers, some of the $6.5 billion should be allocated towards helping the small business industry, which accounts for 85% of employment. Stimulating the economy should not come with pumping more money into contractors and local and state governments for building and redevelopment, but to the workers and consumers whose dollars they rely on. Up to this point, the TARP funds have been used for these corporate issues, and rightfully so. But some ground level redevelopment needs to be addressed. If even $2 billion were to be given to small business owners to help stimulate their practices, employees could be hired, consumer confidence could get a boost and the economy could be strengthened. An immediate impact could be generated. As the employment rate continues to rise, what good does it do to build more homes? If the foreclosures are rising, what good does it to add on to the supply?

Housing Affordability factors have been key in the progression of the economic downturn, according to the latest report by AccuriZ entitled ‘Housing In Crisis.’

Housing Affordability

CLICK to MAXIMIZE

Based on AccuriZ property data and public records, historical trends of the median sale price of homes and the median income of owners has fallen slightly under 3. In the recent decade however, the rate is slightly above 4. “Many housing analysts site this factor for justification of further declines in the overall value of housing. There is sufficient evidence from the banking industry that can be used to counter this argument,” as stated in the report.

When home ownership standards were lightened, there was a surge. “Beginning in the late 90’s the percentage of home ownership began to increase, reaching a peak of approximately 71.8% in late 2006 early 2007. This represented an increase in ownership of approximately 3.5 million housing units for individuals who previously rented, ” the report said. This is all while renter levels remained stable. People who previously weren’t qualified for mortgages now had the ability to own, and they did.

So the question is, which came first? Was there an initial oversupply of housing? And because of these circumstances, mortgage standards were relieved to fulfill the overwhelming vacancy? Or were the mortgage standards relaxed, and because of this new surge in housing demand, home construction rapidly increased? We have reason to be believe that it was the former. But whatever the case is, these two critical pieces of information; oversupply and ownership surge played a pivotal part in the boom and the bust of this recent economic cycle.